Understanding the Key Terms in a Title Insurance Policy

Buying title insurance is important any time you buy a piece of real estate in South Florida. Hopefully, you will never need to file a claim, but if you do, you will be very glad that you have coverage. If an issue arises and you have title insurance, having the ability to file a claim can be the difference between losing your investment and being able to save it or purchase another property.

Whether you are in the process of buying title insurance or you find yourself needing to file a claim, it is important to understand the key terms in a typical title insurance policy. Here is an overview from an experienced Miami title insurance attorney at Edelboim Liberman:

“Covered Risks”

One of the most important clauses in your title insurance policy is the “Covered Risks” section. This is where your policy outlines the types of issues that it covers. The Covered Risks section of your policy will list several “impairments” that have the potential to interfere with your ownership rights—even though you formally acquired the title through a purchase and sale agreement.

Individual policies vary. This is important to keep in mind. To determine which impairments are covered under your title insurance policy, you will need to review its specific language carefully (or hire a Miami title insurance attorney to review it for you). With this in mind, some examples of common Covered Risks include:

• Fraud and Forgery – If the person or entity that sold you the property (or a person or entity earlier in the chain of title) forged the deed or engaged in any other form of fraud, this may be covered under your title insurance policy.
• Errors at the Title Recording Office – Along with fraud and forgery, most title insurance policies also cover errors at the recording office. For example, if the recording office failed to register a properly filed title transfer, you should be covered in the event that the unrecorded owner claims exclusive title to the property.
• Outstanding Construction Liens – A lien is a legal right to an ownership interest in a piece of property that is tied to a debt. In the construction world, construction companies and contractors regularly obtain liens to protect themselves in case property owners don’t pay. Title insurance policies commonly include coverage for outstanding construction liens that aren’t disclosed prior to sale.
• Outstanding Judgment Liens – In addition to construction liens, properties can also be subject to judgment liens. For example, if someone gets injured in a slip-and-fall accident and files a successful premises liability claim, the court may impose a lien to ensure payment of the plaintiff’s judgment. Judgment liens are commonly covered under title insurance policies as well.
• Unpaid Mortgage Debt – It is also fairly common for title insurance policies to cover prior owners’ unpaid mortgage debt. Unpaid mortgage debt can lead to foreclosure, as lenders generally have the right to take possession of financed properties when borrowers don’t pay. Buying title insurance can help protect you in the event that a prior owner’s lender seeks to foreclose on your property.
• Unpaid Taxes and Assessments – Unpaid taxes and assessments can also lead to liens that “encumber” the ownership of a piece of real property. If you have title insurance and you discover that a prior owner did not pay all taxes and assessments owed in connection with your property, you should be able to file a claim under your policy if necessary. However, as we discuss below, exclusions may apply.

Again, these are just common examples. Your policy may or may not cover each of these risks, and it may potentially cover other risks as well.

“Exclusions”

Along with the “Covered Risks” section of your title insurance policy, one of the other most important sections is the “Exclusions” section. This section lists issues that are not covered under your policy. Some examples of common exclusions in title insurance policies include:

• Easements and Rights of Way – Easements and rights of way are commonly excluded from coverage under title insurance policies in South Florida. These are the rights of non-owners to use or access a property for specific purposes.
• Tax Assessments on New Construction – While unpaid taxes are commonly included as “covered risks,” tax assessments on new construction dwellings are a common exclusion. If you purchased a new home and the developer did not pay the taxes owed, you may need to deal with the developer instead of your title insurance company.
• Issues with the Property Itself – If you discover an issue with your property after purchasing it, such as mold or a pest infestation, this most likely is not covered under your title insurance policy. However, you may have a claim under your homeowner’s insurance policy, or you could potentially have a claim against the seller if it fraudulently withheld known information about the property.
• Scheduled Risks – Your title insurance policy may include a Schedule that lists specific and known risks related to your property. If you are choosing (or have chosen) to purchase a piece of real estate despite knowing about issues that may impair the title, these risks generally won’t be covered under your title insurance policy.

Here, too, these are just examples. Additionally, while these issues might not be covered under your title insurance policy, you may still have other options available. As a result, even if you are dealing with an issue that falls under your title insurance policy’s “Exclusions” section, you should still speak with a Miami title insurance attorney about your next steps.

Request a Free Consultation with a Miami Title Insurance Attorney

Do you have questions about title insurance in South Florida? If so, we invite you to contact us for more information. Whether you are thinking about buying a piece of real estate or thinking about filing a title insurance claim, we can help you make informed decisions. To speak with an experienced Miami title insurance attorney in confidence, please call 305-768-9909 or request a free consultation online today.